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Automakers snazz up small cars to lure wary buyers

GENEVA (AP) — The small cars premiering at the Geneva Motor Show this week are not the boxy fuel-savers of yesteryear.

European automakers have downsized SUVs and put all the luxury they can into premium subcompacts as they seek to dazzle consumers back into confidence after years of crisis.

European manufacturers are facing one of their toughest seasons yet. Unemployment and austerity measures have made consumers in Europe skittish, factories are idle, and yet there is little automakers can do to close plants without upsetting politicians at home.

Their response, on view at the Geneva auto show on Tuesday, is to come on strong with small cars that pack value, with less of an emphasis on alternative powertrains such as electric and hybrid autos that have dominated recent editions of the Geneva event.

"Three years ago everybody was caught with their pants down and they are worried that it could happen again if the euro collapses or China stops buying," said Frank Rinderknecht, CEO of Rinspeed, a Swiss design company that specializes in developing new concepts for the automotive industry.

Even the premium makers have put the emphasis on their smaller cars. Mercedes is looking for younger buyers — read under 50 — for the new A-Class. Audi rolled out the third-generation in its A3 series, which 15 years ago was the first compact in the premium market. And Volvo launched its V40, a five-door hatchback that adds a compact design to the company's lineup of saloons, station wagons and SUVs.

In this picture taken March 3, 2012 a representative of the Honda booth works next to a car during t …

From the mass-market producers, Ford premiered the B-Max, a family-friendly subcompact, while Fiat launched its 500L, a larger version of the tiny 500 city car that is being made in Serbia. Toyota has put a little snarl on the hybrid version of its best-selling Yaris to give it a more aggressive look.

Meanwhile Peugeot is turning automotive convention on its head by making the new 208 smaller than its predecessor.

The launches are a far cry from the days when small cars were spartan money-savers. While remaining easy on fuel consumption and light on emissions, these models are tooled with the latest safety features and touches of luxury to spruce up the compact and subcompact segments that comprise some 80 percent of the European market.

"Remember when smaller cars used to be cheap and cheerful? Now the consumers want the finest quality, the finest fuel efficiency, safety and design," said Ford CEO Alan Mulally.

The problem for European mass market automakers is that consumer demand has shriveled under the pressure of the sovereign debt crisis: this year sales are expected shrink nearly 5 percent to 12.9 million units, according to the Center for Automotive Research.

In this picture taken March 3, 2012, two employees of the Aston Martin booth are cleaning the logo d …

Europe's mass-market automakers are overwhelmingly reporting losses: Fiat, Peugeot-Citroen PSA, General Motors' Adam Opel, and Renault. And their partners and parent companies are posting profits despite the European losses, thanks to sales in emerging markets or the United States.

Fiat and Chrysler CEO Sergio Marchionne warned that unless automakers are allowed to close unproductive factories, one or more automakers will fail in the medium- to long-term. But he said the issue can't be solved on a national level, and urged European officials to provide a "concerted road map" for the auto industry to close idled plants

If that doesn't happen "some of us may not be around," he said. "We need to be careful here. We are playing with fire."

Marchionne said Fiat can survive thanks to its partnership with Chrysler. His aim is to produce cars for the recovering U.S. market at Italian plants, which analysts say are running at 60 percent capacity.

The CEO of Nissan-Renault, Carlos Ghosn, said Europe's car industry could see a wave of restructuring once one major company takes the first step.

In this picture taken March 3, 2012 a car stands at the Lancia booth during the last preparations pr …

"The day it will start, everybody is going to have to follow," he said. "There is no such thing as one car manufacturer restructuring and everyone else stays idle."

A fresh alliance inked last week between General Motors and Peugeot is a sign that the industry is looking at ways to cut costs.

GM will take a 7 percent stake in Peugeot, Europe's No. 2 automaker, in a deal that foresees a common platform by 2016 and synergies in the purchase of parts. The carmakers say it will save them $2 billion a year within five years, split roughly equally.

So far, the automakers have not discussed the possibility of job cuts and factory closures — moves expected by analysts.

The head of General Motors Europe, Karl-Friedrich Stracke, on Tuesday tried to dampen fears of mass job cuts in Europe, but didn't rule them out.

"We need a sustainable setup. No company can keep making a loss," Stracke said.

Meanwhile, Japanese car maker Nissan, which is in an alliance with French automaker Renault, announced it is investing 125 million pounds ($198 million) to build the new Invitation compact car at its British factory — a rare expansion of auto production in western Europe that Ghosn partly attributed to the competitive weakness of the British pound.

Nissan said the Invitation will compete with Ford's Fiesta and Volkswagen's Polo models, and debut next year.